Macroeconomic Framework for Development in Gujarat

Ravindra H. Dholakia

No WP2004-02-02, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: The paper begins by discussing need for developing a regional accounting framework and estimating relevant variables to formulate realistic growth targets and appropriate development strategy in the reform era for the Gujarat State as a case. The study then examines growth experience in various sectors of the state and derives growth potential of the economy in medium and long term. Elementary regional accounting framework and estimates of crucial macroeconomic aggregates at the state level in India are attempted for the first time for Gujarat to derive implications on resource availability and investment requirement to achieve alternative growth targets. The study finds that Gujarat is a high saving society comparable to China and Korea, but invests much less domestically. Although it a net importer internationally, it is a major net exporter within the country. The paper also attempts to identify the prime movers or principal drivers of the economic growth in the state by fitting a simultaneous equations model on the recent time series data on Gujarat. Electricity, gas & water supply; storage & communications; construction; real estates and rainfall are the prime movers in Gujarat. The paper also examines the social and human development aspects and explores how they can be integrated with the macroeconomic growth model in Gujarat. The paper concludes by discussing strategic policy interventions to achieve the development goals of the state.

Date: 2004-02-02
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